20180331

UNITED STATES

SECURITIES AND EXCHANGE COMMISION

Washington, D.C. 20549



FORM 10-Q



(Mark one)



[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended March 31, 2018



Or



[   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934



For the transition period from __________ to______________



Commission File Number 0-25045



CENTRAL FEDERAL CORPORATION

(Exact name of registrant as specified in its charter)





 

Delaware

34-1877137

(State or other jurisdiction of

(IRS Employer

incorporation or organization)

Identification No.)



7000 North High St.,  Worthington, Ohio  43085

(Address of principal executive offices) (Zip Code)



(614) 334-7979

(Registrant’s telephone number, including area code)





(Former name or former address, if changed since last report)

 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [X]        No [  ]



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]      No [  ]



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a  smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”  and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer [  ]Accelerated filer [  ]  Non-accelerated filer [  ]  Smaller reporting company [X]Emerging growth company [    ]



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes [  ]     No[X]



As of May 1, 2018, there were  23,387,047 shares of the registrant’s Common Stock outstanding.





 


 

Table of Contents

CENTRAL FEDERAL CORPORATION



INDEX





 

 

PART I.  Financial Information

Page



 

 

Item 1.    Financial Statements



 

 



Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017



 

 



Consolidated Statements of Income for the three months ended March 31, 2018 and 2017 (unaudited)



 

 



Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017 (unaudited)



 

 



Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2018 and 2017 (unaudited)



 

 



Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited)



 

 



Notes to Consolidated Financial Statements (three months ended March 31, 2018 and 2017 unaudited)



 

 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

37 



 

 

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

50 



 

 

Item 4.     Controls and Procedures

51 



 

 

PART II.  Other Information

52 



 

 

Item 1.     Legal Proceedings

52 



 

 

Item 1A.   Risk Factors

52 



 

 

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

52 



 

Item 3.     Defaults Upon Senior Securities

52 



 

Item 4.     Mine Safety Disclosures

52 



 

Item 5.     Other Information

52 



 

Item 6.     Exhibits

53 



 

Signatures

54 

 



 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands except per share data)



     



 

 

 

 

 



March 31,

 

December 31,



2018

 

2017



(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

$

70,396 

 

$

45,498 

Interest-bearing deposits in other financial institutions

 

100 

 

 

100 

Securities available for sale

 

11,185 

 

 

11,773 

Loans held for sale, at fair value

 

8,863 

 

 

1,124 

Loans and leases, net of allowance of $6,976 and $6,970

 

422,495 

 

 

406,406 

FHLB and FRB stock

 

3,251 

 

 

3,227 

Premises and equipment, net

 

3,584 

 

 

3,533 

Bank owned life insurance

 

5,098 

 

 

5,065 

Accrued interest receivable and other assets

 

4,955 

 

 

4,699 

Total assets

$

529,927 

 

$

481,425 



 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

Deposits

 

 

 

 

 

Noninterest bearing

$

91,359 

 

$

89,588 

Interest bearing

 

369,686 

 

 

329,440 

Total deposits

 

461,045 

 

 

419,028 

FHLB advances and other debt

 

19,500 

 

 

13,500 

Advances by borrowers for taxes and insurance

 

236 

 

 

489 

Accrued interest payable and other liabilities

 

2,889 

 

 

2,992 

Subordinated debentures

 

5,155 

 

 

5,155 

Total liabilities

 

488,825 

 

 

441,164 



 

 

 

 

 

Commitments and contingent liabilities

 

-  

 

 

-  



 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Common stock, $.01 par value;

 

 

 

 

 

shares authorized: 50,000,000;

 

 

 

 

 

shares issued: 23,467,906 at March 31, 2018 and 23,501,972 at December 31, 2017

 

235 

 

 

235 

Series B Preferred stock, $0.01 par value; 480,000 shares authorized;

 

 

 

 

 

 0 issued at March 31, 2018 and 0 at December 31, 2017

 

-  

 

 

-  

Additional paid-in capital

 

60,613 

 

 

60,484 

Accumulated deficit

 

(16,321)

 

 

(17,087)

Accumulated other comprehensive loss

 

(101)

 

 

(47)

Treasury stock, at cost; 152,359 shares of common stock at March 31, 2018 and December 31, 2017

 

(3,324)

 

 

(3,324)

Total stockholders' equity

 

41,102 

 

 

40,261 

Total liabilities and stockholders' equity

$

529,927 

 

$

481,425 

 



 

 

See accompanying notes to consolidated financial statements.

3

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands except per share data)

(Unaudited)

       



 

 

 

 

 



Three months ended



March 31,



2018

 

2017

Interest and dividend income

 

 

 

 

 

Loans and leases, including fees

$

4,867 

 

$

3,679 

Securities

 

43 

 

 

48 

FHLB and FRB stock dividends

 

47 

 

 

22 

Federal funds sold and other

 

147 

 

 

108 



 

5,104 

 

 

3,857 

Interest expense

 

 

 

 

 

Deposits

 

1,042 

 

 

680 

FHLB advances and other debt

 

92 

 

 

61 

Subordinated debentures

 

59 

 

 

50 



 

1,193 

 

 

791 

Net interest income

 

3,911 

 

 

3,066 

Provision for loan and lease losses

 

-  

 

 

-  

Net interest income after provision for loan losses

 

3,911 

 

 

3,066 



 

 

 

 

 

Noninterest income

 

 

 

 

 

Service charges on deposit accounts

 

118 

 

 

89 

Net gains on sales of loans

 

308 

 

 

23 

Earnings on bank owned life insurance

 

33 

 

 

33 

Other

 

22 

 

 

21 



 

481 

 

 

166 

Noninterest expense

 

 

 

 

 

Salaries and employee benefits

 

1,897 

 

 

1,414 

Occupancy and equipment

 

167 

 

 

152 

Data processing

 

231 

 

 

277 

Franchise and other taxes

 

102 

 

 

91 

Professional fees

 

250 

 

 

248 

Director fees

 

97 

 

 

69 

Postage, printing and supplies

 

49 

 

 

43 

Advertising and marketing

 

267 

 

 

17 

Telephone

 

32 

 

 

32 

Loan expenses

 

15 

 

 

38 

Foreclosed assets, net

 

-  

 

 

Depreciation

 

59 

 

 

51 

FDIC premiums

 

88 

 

 

71 

Regulatory assessment

 

34 

 

 

32 

Other insurance

 

22 

 

 

26 

Other

 

104 

 

 

52 



 

3,414 

 

 

2,620 

Income before incomes taxes

 

978 

 

 

612 

Income tax expense

 

186 

 

 

208 

Net income

 

792 

 

 

404 

Dividends on Series B preferred stock and accretion of discount

 

(26)

 

 

(214)

Net income attributable to common stockholders

$

766 

 

$

190 



 

 

 

 

 

Earnings per common share:

 

 

 

 

 

Basic

$

0.03 

 

$

0.01 

Diluted

$

0.03 

 

$

0.01 

 



 

 

See accompanying notes to consolidated financial statements.

4

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands except per share data)

(Unaudited)

         



 

 

 

 

 



Three months ended



March 31,



2018

 

2017

Net income

$

792 

 

$

404 

Other comprehensive loss:

 

 

 

 

 

Unrealized holding losses arising during the period related to securities available for sale, net of tax of ($12) and $0

 

(54)

 

 

(1)

Other comprehensive loss, net of tax

 

(54)

 

 

(1)

Comprehensive income

$

738 

 

$

403 

 



 

 

See accompanying notes to consolidated financial statements.

5

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands except per share data)

(Unaudited)



     



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 



 

 

 

Series B

 

Additional

 

 

 

 

Other

 

 

 

 

Total



Common

 

Preferred

 

Paid-In

 

Accumulated

 

Comprehensive

 

Treasury

 

Stockholders'



Stock

 

Stock

 

Capital

 

Deficit

 

Income (Loss)

 

Stock

 

Equity

Balance at January 1, 2018

$

235 

 

$

-  

 

$

60,484 

 

$

(17,087)

 

$

(47)

 

$

(3,324)

 

$

40,261 

Net income

 

 

 

 

 

 

 

 

 

 

792 

 

 

 

 

 

 

 

 

792 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(54)

 

 

 

 

 

(54)

Restricted stock expense, net of forfeitures

 

 

 

 

 

 

 

96 

 

 

 

 

 

 

 

 

 

 

 

96 

Exercise of warrants to common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of discount on warrants

 

 

 

 

 

 

 

26 

 

 

(26)

 

 

 

 

 

 

 

 

-  

Balance at March 31, 2018

$

235 

 

$

-  

 

$

60,613 

 

$

(16,321)

 

$

(101)

 

$

(3,324)

 

$

41,102 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 



 

 

 

Series B

 

Additional

 

 

 

 

Other

 

 

 

 

Total



Common

 

Preferred

 

Paid-In

 

Accumulated

 

Comprehensive

 

Treasury

 

Stockholders'



Stock

 

Stock

 

Capital

 

Deficit

 

Income (Loss)

 

Stock

 

Equity

Balance at January 1, 2017

$

164 

 

$

 

$

60,163 

 

$

(17,767)

 

$

 

$

(3,275)

 

$

39,292 

Net income

 

 

 

 

 

 

 

 

 

 

404 

 

 

 

 

 

 

 

 

404 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

 

 

 

 

(1)

Restricted stock expense, net of forfeitures

 

 

 

 

 

 

 

61 

 

 

 

 

 

 

 

 

 

 

 

61 

Cash dividends declared on Series B preferred stock and accretion of discount

 

 

 

 

 

 

 

27 

 

 

(214)

 

 

 

 

 

 

 

 

(187)

Balance at March 31, 2017

$

164 

 

$

 

$

60,251 

 

$

(17,577)

 

$

 

$

(3,275)

 

$

39,569 

 





 

 

See accompanying notes to consolidated financial statements.

6

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)



          



 

 

 

 

 



 

Three months ended



 

March 31,



 

2018

 

 

2017

Net Income

$

792 

 

$

404 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

Provision for loan and lease losses

 

-  

 

 

-  

Depreciation

 

59 

 

 

51 

Amortization, net

 

(17)

 

 

(20)

Deferred income tax (benefit)

 

 

 

(96)

Originations of loans held for sale

 

(11,484)

 

 

(6,615)

Proceeds from sale of loans held for sale

 

4,053 

 

 

8,620 

Net gains on sales of loans

 

(308)

 

 

(23)

Write-down of premises and equipment

 

32 

 

 

-  

Earnings on bank owned life insurance

 

(33)

 

 

(33)

Stock-based compensation expense

 

96 

 

 

61 

Net change in:

 

 

 

 

 

Accrued interest receivable and other assets

 

(256)

 

 

184 

Accrued interest payable and other liabilities

 

(103)

 

 

(532)

Net cash from (used by) operating activities

 

(7,167)

 

 

2,001 

Cash flows from investing activities

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

Maturities, prepayments and calls

 

530 

 

 

42 

Loan and lease originations and payments, net

 

3,599 

 

 

(14,821)

Loans purchased

 

(19,669)

 

 

-  

Additions to premises and equipment

 

(142)

 

 

(30)

Purchase of FRB Stock

 

(24)

 

 

(1,244)

Net cash used by investing activities

 

(15,706)

 

 

(16,053)

Cash flows from financing activities

 

 

 

 

 

Net change in deposits

 

42,017 

 

 

(27,119)

Proceeds from FHLB advances and other debt

 

6,000 

 

 

8,100 

Repayments on FHLB advances and other debt

 

-  

 

 

(100)

Net change in advances by borrowers for taxes and insurance

 

(253)

 

 

(276)

Cash dividends paid on Series B preferred stock

 

-  

 

 

(187)

Exercise of warrants to common stock

 

 

 

-  

Net cash from (used by) financing activities

 

47,771 

 

 

(19,582)

Net change in cash and cash equivalents

 

24,898 

 

 

(33,634)

Beginning cash and cash equivalents

 

45,498 

 

 

57,941 

Ending cash and cash equivalents

$

70,396 

 

$

24,307 



 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid

$

1,187 

 

$

816 

Supplemental noncash disclosures:

 

 

 

 

 

Dividends payable on Series B preferred stock

 

-  

 

 

187 

 



 

 

See accompanying notes to consolidated financial statements.

7

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)



NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include Central Federal Corporation (the “Holding Company”) and its wholly-owned subsidiary, CFBank, National Association (“CFBank”).  The Holding Company and CFBank are sometimes collectively referred to herein as the “Company”.  Intercompany transactions and balances are eliminated in consolidation.  The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in compliance with U.S. generally accepted accounting principles (GAAP).  Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of the management of the Company, the accompanying unaudited interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented.  These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q.  The financial performance reported for the Company for the three months ended March 31, 2018 is not necessarily indicative of the results that may be expected for the full year.  This information should be read in conjunction with the Company’s latest Annual Report to Stockholders and Annual Report on Form 10-K on file with the SEC.  Reference is made to the accounting policies of the Company described in Note 1 to the Audited Consolidated Financial Statements contained in the Company’s 2017 Annual Report to Stockholders that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2017 (referred to herein as the “2017 Audited Financial Statements”).  The Company has consistently followed those policies in preparing this Form 10-Q.

Loans and Leases:  Loans and leases that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, adjusted for purchase premiums and discounts, deferred loan fees and costs and an allowance for loan and lease losses (ALLL).  Interest income is accrued on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level yield method without anticipating prepayments. 

The accrual of interest income on all classes of loans, except other consumer loans, is discontinued and the loan is placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection.  Other consumer loans are typically charged off no later than 90 days past due.  Past due status is based on the contractual terms of the loan for all classes of loans.  In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.  Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.  Commercial loans, multi-family residential real estate loans and commercial real estate loans placed on nonaccrual status are individually classified as impaired loans.

All interest accrued but not received for each loan placed on nonaccrual is reversed against interest income in the period in which the loan is placed in a nonaccrual status.  Interest received on such loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual status.  Loans are considered for return to accrual status if and when all the principal and interest amounts that are contractually due are brought current, there is a current and well documented credit analysis, there is reasonable assurance of repayment of principal and interest, and the customer has demonstrated sustained, amortizing payment performance of at least six months.

Allowance for Loan and Lease Losses (ALLL):  The ALLL is a valuation allowance for probable incurred credit losses.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.  Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components.  The specific component relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Loans within any loan class for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (TDRs) and classified as impaired.  

8

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)



Factors considered by management in determining impairment for all loan classes include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  

All loans within the commercial, multi-family residential and commercial real estate segments, regardless of size, and loans of all other classes with balances over $250 are individually evaluated for impairment when they are 90 days past due, or earlier than 90 days past due if information regarding the payment capacity of the borrower indicates that payment in full according to the loan terms is doubtful.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral, less costs to sell, if repayment is expected solely from the collateral.  Large groups of smaller balance homogeneous loans, such as consumer and single-family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

TDRs of all classes of loans are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using each loan’s effective rate at inception.  If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. If the payment of the loan is dependent on the sale of the collateral, then costs to liquidate the collateral are included when determining the impairment.  For TDRs that subsequently default, the amount of reserve is determined in accordance with the accounting policy for the ALLL.

Interest income on all classes of impaired loans that are on nonaccrual status is recognized in accordance with the accounting policy for nonaccrual loans.  Cash receipts on all classes of impaired loans that are on nonaccrual status are generally applied to the principal balance outstanding.  Interest income on all classes of impaired loans that are not on nonaccrual status is recognized on the accrual method. TDRs may be classified as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note.

The general reserve component covers non-impaired loans of all classes and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by loan class and is based on the actual loss history experienced by the Company over a three-year period.  The general component is calculated based on CFBank’s loan balances and actual historical three-year historical loss rates.  For loans with little or no actual loss experience, industry estimates are used based on loan segment. This loss experience is supplemented with other economic and judgmental factors based on the risks present for each loan class.  These economic and judgmental factors include consideration of the following:  levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

CFBank’s charge-off policy for commercial loans, single-family residential real estate loans, multi-family residential real estate loans, commercial real estate loans, construction loans and home equity lines of credit requires management to record a specific reserve or charge-off as soon as it is apparent that the borrower is troubled and there is, or likely will be, a collateral shortfall related to the estimated value of the collateral securing the loan.  Other consumer loans are typically charged off no later than 90 days past due.

Joint Ventures:  The Holding Company has contributed funds into a series of joint ventures (equity stake) for the purpose of allocating excess liquidity into higher earning assets while diversifying its revenue sources.  The funding for the joint ventures is related to shorter term operating activities and is related to the development of single family real estate in the form of condominiums.  Income is recognized based on a rate of return on the outstanding investment balance.  As units are sold, the Holding Company receives an additional incentive payment, which is recognized as income.

Low Income Housing Tax Credits (LIHTC):  The Company has invested in low income housing tax credits through a fund that assists corporations in investing in limited partnerships and limited liability companies that own, develop and operate low income residential rental properties for purposes of qualifying for the Housing Tax credit. These investments are accounted for under the proportional amortization method which recognizes the amortization of the investment in proportion to the tax credit and other tax benefits received.

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Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)



Earnings Per Common Share: The two-class method is used in the calculation of basic and diluted earnings per share.  Under the two-class method, earnings available to common stockholders for the period are allocated between common stockholders and participating securities (unvested share-based payment awards) according to dividends declared (or accumulated) and participation rights in undistributed earnings.  The factors used in the earnings per share computation follow:



 

 

 

 

 



Three months ended



March 31,



2018

 

2017



(unaudited)

Basic

 

 

 

 

 

Net income

$

792 

 

$

404 

Dividends on Series B preferred stock and accretion of discount

 

(26)

 

 

(214)

Net income allocated to common stockholders

$

766 

 

$

190 



 

 

 

 

 

Weighted average common shares outstanding including unvested share-based payment awards

 

23,336,008 

 

 

16,292,166 

Less: Unvested share-based payment awards

 

-  

 

 

-  

Average shares

 

23,336,008 

 

 

16,292,166 

Basic earnings per common share

$

0.03 

 

$

0.01 



 

 

 

 

 

Diluted

 

 

 

 

 

Net earnings allocated to common stockholders

$

766 

 

$

190 



 

 

 

 

 

Weighted average common shares outstanding for basic earnings per common share

 

23,336,008 

 

 

16,292,166 

Add:  Dilutive effects of assumed exercises of stock options

 

216,147 

 

 

190,407 

Add:  Dilutive effects of assumed exercises of stock warrants

 

1,139,925 

 

 

1,152,125 

Average shares and dilutive potential common shares

 

24,692,080 

 

 

17,634,698 

Diluted earnings per common share

$

0.03 

 

$

0.01 



The following securities exercisable for or convertible into common shares were anti-dilutive and not considered in computing diluted earnings per common share: 



 

 

 



Three months ended
March 31,



2018

 

2017



(unaudited)

Stock options

5,056 

 

5,446 

Series B preferred stock

 -

 

6,857,143 





Dividend Restriction:  Banking regulations require us to maintain certain capital levels and may limit the dividends paid by CFBank to the Holding Company or by the Holding Company to stockholders.  The ability of the Holding Company to pay dividends on its common stock is generally dependent upon the receipt of dividends and other distributions from CFBank.  CFBank is a legal entity that is separate and distinct from the Holding Company and has no obligation to make any dividends or other funds available to the Holding Company for the payment of dividends by the Holding Company.  The Holding Company also is subject to various legal and regulatory policies and guidelines impacting the Holding Company’s ability to pay dividends on its stock.  In addition, the Holding Company’s ability to pay dividends on its stock is conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities.   

10

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)



Effective October 6, 2017, all of the Holding Company’s outstanding shares of Series B Preferred Stock were converted into shares of Common Stock of the Company.  The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the fourth quarter of 2017.

Adoption of New Accounting Standards:

In May 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606).  ASU No. 2014-09, including all subsequent amendments to the ASU, (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, such as OREO. The majority of the Company's revenues come from interest income and other sources, including loans, leases, securities and derivatives, that are outside the scope of ASC 606.  The Company's services that fall within the scope of ASC 606, primarily service charges on deposits, are presented within noninterest income and are recognized as revenue as the Company satisfies its obligation to the customer.  ASU 2014-09 became effective for us on January 1, 2018 and had no material effect on how we recognize revenue or to our consolidated financial statements and disclosures.  See Note 2 – Revenue Recognition for additional information related to revenue generated from contracts with customers.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial LiabilitiesASU 2016-01 amends the guidance in U.S. GAAP on the accounting for equity investments, financial liabilities under the fair value option and the presentations and disclosure requirements of financial instruments.  ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option.  The Company adopted the methodologies prescribed by the ASU by the date required.  Adoption of ASU No. 2016-01 did not have a significant effect on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments which may change how an entity classifies certain cash receipts and cash payments on its statement of cash flows to reduce diversity in practice.  The update also provides guidance on when an entity should separate cash flows and classify them into more than one class and when an entity should classify the aggregate of those cash flows into a single class based on the predominance principle.  The guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted.  Adoption of ASU No. 2016-15 did not have a significant impact on the Company’s consolidated financial statements.

The FASB has issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.  ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award.  The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to the modification of the terms and conditions of a share-based payment award.  The amendments are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.  Early adoption is permitted, including adoption in any interim period for: (a) public business entities for reporting periods for which financial statements have not yet been issued, and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance.  The amendments should be applied prospectively to an award modified on or after the adoption date. Adoption of ASU No. 2017-09 did not have a significant impact on the Company’s consolidated financial statements.

Future Accounting Matters:

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)Under the new ASU, lessees will recognize lease assets and liabilities on their balance sheets for all leases with terms of more than 12 months.  The new lessee accounting model retains two types of leases, and is consistent with the lessee accounting model under existing GAAP.  One type of lease (finance leases) will be accounted for in substantially the same manner as capital leases are accounted for today.  The other type of lease (operating leases) will be accounted for (both in the income statement and statement of cash flows) in a manner consistent with today’s operating leases.  Lessor accounting under the new standard is fundamentally consistent with existing GAAP.  Lessees and lessors would be required to provide additional qualitative and quantitative disclosures to help financial statement users assess the amount, timing, and uncertainty of cash flows arising from leases.  These disclosures are intended to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an organization’s leasing activities.  For public business entities, the final lease standard will be effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years.  Early application is permitted.  The Company continues to evaluate the provision of the new lease standard

11

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

and although we have not yet reasonably determined the estimated financial statement impact, due to the small number of lease agreements presently in effect for the Company, we believe the new guidance will not have a significant impact on the Company’s consolidated financial statements, including disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.   Once effective, ASU No. 2016-13 will significantly change current guidance for recognizing impairment of financial instruments.  Current guidance requires an "incurred loss" methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred.  ASU No. 2016-13 replaces the incurred loss impairment methodology with a new methodology that reflects expected credit losses over the lives of the loans and requires consideration of a broader range of information to inform credit loss estimates.  The ASU requires an organization to estimate all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts.  Additional disclosures are required.  ASU No. 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  Under the new guidance, entities will determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss.  Any credit loss will be recognized as an allowance for credit losses on available-for-sale debt securities rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.  As a result, entities will recognize improvements to estimated credit losses on available-for-sale debt securities immediately in earnings rather than as interest income over time, as currently required.  ASU No. 2016-13 eliminates the current accounting model for purchased credit impaired loans and debt securities.  Instead, purchased financial assets with credit deterioration will be recorded gross of estimated credit losses as of the date of acquisition and the estimated credit losses amounts will be added to the allowance for credit losses.  Thereafter, entities will account for additional impairment of such purchased assets using the models listed above.  ASU No. 2016-13 will take effect for U.S. Securities and Exchange Commission (SEC) filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  While the Company generally expects that the implementation of ASU 2016-13 has the potential to increase its allowance for loan losses balance, the Company is continuing to evaluate the potential impact on the Company’s financial statements and disclosures.  Management is currently assessing any additional data and system requirements necessary for adoption.  At this time, the estimated impact on the Company’s consolidated financial statement, including disclosures, cannot be reasonably determined.    

The FASB has issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.  The new standard is intended to improve and simplify accounting rules around hedge accounting.  The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks.  Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts.  The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, for public companies and for fiscal years beginning after December 15, 2019 (and interim periods for fiscal years beginning after December 15, 2020), for private companies. Early adoption is permitted in any interim period or fiscal years before the effective date of the standard.  Adoption of ASU No. 2017-12 is not expected to have a significant impact on the Company’s consolidated financial statements

The FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220)—Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  The ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

The ASU requires financial statement preparers to disclose:

·

A description of the accounting policy for releasing income tax effects from AOCI;

·

Whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and

·

Information about the other income tax effects that are reclassified.



The amendments affect any organization that is required to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP.  The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted.  Adoption of ASU No. 2018-02 is not expected to have a material impact on the Company’s consolidated financial statements. 

12

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)



General Litigation

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business.  In the opinion of management, the disposition or ultimate resolution of such claims and lawsuits is not anticipated to have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company. 

Reclassifications

Reclassification of certain amounts in the 2017 consolidated financial statements have been made to conform to the 2018 presentation.





NOTE 2 – REVENUE RECOGNITION

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of our revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as our loans, letters of credit, derivatives and investment securities, as well as revenue related to our mortgage activities related to net gains on sale of loans.

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within Noninterest Income.  Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components of non-interest income are as follows:

·

Service charges on deposit accounts - these represent general service fees for monthly account maintenance and activity, or transaction-based fees,  and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.





NOTE 3 – SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at March 31, 2018 and December 31, 2017 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income (loss):



 

 

 

 

 

 

 

 

 

 

 

 



 

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

March 31, 2018 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Issued by U.S. government-sponsored entities and agencies:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

10,998 

 

$

-  

 

$

136 

 

$

10,862 

Mortgage-backed securities - residential

 

 

219 

 

 

 

 

-  

 

 

225 

Collateralized mortgage obligations

 

 

96 

 

 

 

 

-  

 

 

98 

Total

 

$

11,313 

 

$

 

$

136 

 

$

11,185 



13

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)





 

 

 

 

 

 

 

 

 

 

 

 



 

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

Issued by U.S. government-sponsored entities and agencies:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

11,499 

 

$

-  

 

$

82 

 

$

11,417 

Mortgage-backed securities - residential

 

 

236 

 

 

 

 

-  

 

 

244 

Collateralized mortgage obligations

 

 

110 

 

 

 

 

-  

 

 

112 

Total

 

$

11,845 

 

$

10 

 

$

82 

 

$

11,773 



There was no other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale at March 31, 2018 or March  31, 2017.

There were no sales of securities for the three months ended March 31, 2018 and 2017.

The amortized cost and fair value of debt securities at March 31, 2018 and December 31, 2017 are shown in the table below by contractual maturity.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity date are shown separately.



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

March 31, 2018

 

 

December 31, 2017



 

(unaudited)

 

 

 

 

 

 



 

Amortized Cost

 

Fair Value

 

Amortized Cost

 

Fair Value

Due in one year or less

 

$

3,503 

 

$

3,486 

 

$

3,002 

 

$

2,993 

Due from one to five years

 

 

7,495 

 

 

7,376 

 

 

8,497 

 

 

8,424 

Mortgage-backed securities - residential

 

 

219 

 

 

225 

 

 

236 

 

 

244 

Collateralized mortgage obligations

 

 

96 

 

 

98 

 

 

110 

 

 

112 

 Total

 

$

11,313 

 

$

11,185 

 

$

11,845 

 

$

11,773 





Fair value of securities pledged was as follows:



 

 

 

 

 



March 31, 2018

 

December 31, 2017



(unaudited)

 

 

 

Pledged as collateral for:

 

 

 

 

 

FHLB advances

$

4,590 

 

$

4,641 

Public deposits

 

2,007 

 

 

2,018 

Interest-rate swaps

 

133 

 

 

145 

Total

$

6,730 

 

$

6,804 



At March 31, 2018 and December 31, 2017, there were no holdings of securities of any one issuer, other than U.S. government-sponsored entities and agencies, in an amount greater than 10% of stockholders’ equity.

14

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)



The following table summarizes securities with unrealized losses at March 31, 2018 and December 31, 2017, aggregated by major security type and length of time in a continuous unrealized loss position.





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018 (unaudited)

 

Less than 12 Months

 

12 Months or More

 

Total

Description of Securities

 

Fair Value

 

Unrealized Loss

 

Fair Value

 

Unrealized Loss

 

Fair Value

 

Unrealized Loss

Issued by U.S. government-sponsored entities and agencies:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

6,900 

 

$

99 

 

$

3,962 

 

$

37 

 

$

10,862 

 

$

136 

Total temporarily impaired

 

$

6,900 

 

$

99 

 

$

3,962 

 

$

37 

 

$

10,862 

 

$

136 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

Less than 12 Months

 

12 Months or More

 

Total

Description of Securities

 

Fair Value

 

Unrealized Loss

 

Fair Value

 

Unrealized Loss

 

Fair Value

 

Unrealized Loss

Issued by U.S. government-sponsored entities and agencies:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

6,947 

 

$

51 

 

$

4,470 

 

$

31 

 

$

11,417 

 

$

82 

Total temporarily impaired

 

$

6,947 

 

$

51 

 

$

4,470 

 

$

31 

 

$

11,417 

 

$

82 





The unrealized losses in U.S. Treasuries at March 31, 2018 and December 31, 2017 are related to multiple securities.  Because the decline in fair value is attributable to changes in market conditions, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell these securities before their anticipated recovery, the Company did not consider these securities to be other-than-temporarily impaired at March 31, 2018 and December 31, 2017.





NOTE 4 – LOANS AND LEASES

The following table presents the recorded investment in loans and leases by portfolio segment.  The recorded investment in loans and leases includes the principal balance outstanding adjusted for purchase premiums and discounts, and deferred loan fees and costs.



 

 

 

 

 



 

 

 

 

 



 

 

 



March 31, 2018

 

December 31, 2017



( unaudited)

 

 

 

Commercial (1)

$

100,732 

 

$

101,975 

Real estate:

 

 

 

 

 

Single-family residential

 

99,409 

 

 

95,578 

Multi-family residential

 

40,018 

 

 

35,665 

Commercial

 

117,614 

 

 

111,866 

Construction

 

39,862 

 

 

42,862 

Consumer:

 

 

 

 

 

Home equity lines of credit

 

26,019 

 

 

25,054 

Other

 

5,817 

 

 

376 

Subtotal

 

429,471 

 

 

413,376 

Less: ALLL

 

(6,976)

 

 

(6,970)

Loans and leases, net

$

422,495 

 

$

406,406 



(1)

Includes $5,859 and $6,008 of commercial leases at March 31, 2018 and December 31, 2017, respectively.

15

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)



Mortgage Purchase Program

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor. The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.  These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.  At March 31, 2018 and December 31, 2017, CFBank held $28,284  and $37,665, respectively, of such loans which have been included in single-family residential loan totals above.

Allowance for Loan and Lease Losses

The ALLL is a valuation allowance for probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. A provision for loan and lease losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors described in Note 1 to the 2017 Audited Financial Statements. 

The following table presents the activity in the ALLL by portfolio segment for the three months ended March 31, 2018:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Three months ended March 31, 2018 (unaudited)



 

 

 

Real Estate

 

 

 

 

Consumer

 

 

 



Commercial

 

Single-family

 

Multi-family

 

Commercial

 

Construction

 

Home Equity lines of credit

 

Other

 

Total

Beginning balance

$

1,984 

 

$

912 

 

$

660 

 

$

2,143 

 

$

672 

 

$

597 

 

$

 

$

6,970 

Addition to (reduction in) provision for loan losses

 

(117)

 

 

131 

 

 

27 

 

 

(4)

 

 

(58)

 

 

(84)

 

 

105 

 

 

-  

Charge-offs

 

-  

 

 

(6)

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

(6)

Recoveries

 

 

 

 

 

-  

 

 

-  

 

 

-  

 

 

 

 

-  

 

 

12 

Ending balance

$

1,869 

 

$

1,039 

 

$

687 

 

$

2,139 

 

$

614 

 

$

521 

 

$

107 

 

$

6,976 







The following table presents the activity in the ALLL by portfolio segment for the three months ended March 31, 2017:  



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Three months ended March 31, 2017 (unaudited)



 

 

 

Real Estate

 

 

 

 

Consumer

 

 

 



Commercial

 

Single-family

 

Multi-family

 

Commercial

 

Construction

 

Home Equity lines of credit

 

Other

 

Total

Beginning balance

$

1,647 

 

$

735 

 

$

716 

 

$

2,727 

 

$

580 

 

$

486 

 

$

34 

 

$

6,925 

Addition to (reduction in) provision for loan losses

 

121 

 

 

115 

 

 

(87)

 

 

(236)

 

 

74 

 

 

17 

 

 

(4)

 

 

-  

Charge-offs

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

 

 

-  

Recoveries

 

-  

 

 

16 

 

 

-  

 

 

-  

 

 

-  

 

 

 

 

-  

 

 

17 

Ending balance

$

1,768 

 

$

866 

 

$

629 

 

$

2,491 

 

$

654 

 

$

504 

 

$

30 

 

$

6,942 



16

 


 

Table of Contents

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)



The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of March 31, 2018 (unaudited):



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Real Estate

 

 

 

 

Consumer

 

 

 



 

Commercial

 

Single-
family

 

Multi-
family

 

Commercial

 

Construction

 

Home Equity
lines of credit

 

Other

 

Total

ALLL:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

-  

 

$

-  

 

$

-  

 

$

27 

 

$

-  

 

$

-  

 

$

-  

 

$

27 

Collectively evaluated for impairment

 

 

1,869 

 

 

1,039 

 

 

687 

 

 

2,112 

 

 

614 

 

 

521 

 

 

107 

 

 

6,949 

Total ending allowance balance

 

$

1,869 

 

$

1,039 

 

$

687 

 

$

2,139 

 

$

614 

 

$

521 

 

$

107 

 

$

6,976